Tag: tax protestor

Tax protestors typically turn to a handful of “canned” arguments regarding the government’s lack of authority to levee taxes. These arguments are typically not very successful. When tax protestors refuse to pay taxes based on these flawed legal positions, they are typically hit with a barrage of penalties and interest on top of their tax debt, and some even do prison time. But tax protestors who are also former IRS agents? — not very typical.

That’s what makes the story of Sherry Peel Jackson so interesting. She worked for seven years as an IRS revenue agent, then she went into private practice as a CPA, then she spent four years in prison for failure to file tax returns, and now she tours around promoting the books she wrote in prison about the illegalities of income taxes.

Don’t believe anyone who tells you that taxes are illegal. You will want to avoid these people like the plague. The tax protestor groups are a sham and can cause you some serious tax problems.

Idaho legislator Phil Hart is not giving politicians a very good name. He is a tax protestor (one of those eccentric believers in unfettered freedom to do what they please which often includes taking the position that the federal income tax is unconstitutional). Many tax protestors believe that payment of income tax is optional, and Phil Hart has definitely exercised the option to NOT pay. Now his federal and state tax debt stretches back to the mid 1990s.

Hart’s tax problems have been public for some time now, but new details emerged when he filed bankruptcy last month. The bankruptcy filings reveal that his total debt is over $600,000 and over $500,000 of that represents money owed for delinquent federal income taxes.

We also learn that (according to Mr. Hart) 100% of his income was subject to wage garnishment during the past seven years. I wonder if this is accurate because the IRS isn’t supposed to take 100% of w-2 income. Maybe the feds were taking their share, then the state was taking the rest.

And finally, we see that Rep. Hart was basically hiding assets to steer clear of the IRS. He put his property into a sham trust to try to keep it out of the hands of the government. But the Dept of Justice sees right through this; the IRS will undoubtedly get at least some of what is owed from the sale of this property. See full story here.

Filmmaker, Alison Klayman, has documented the life and work of Ai Weiwei in a film that premiered at Sundance this past weekend. Ai is known on this blog for his tax problems (“problems” that were likely invented by the Chinese government as a way to appear to incarcerate him for legitimate reasons), but is recognized around the world as one of China’s most outspoken dissidents.

Ai often uses his art to make strong political statements. This is a man who knows he could be snatched up at any moment by Chinese authorities for his provocative art and opinions. He knows that his life (or death) is in the hands of the government he criticizes. His courage and ambition are inspiring.

This week the US Department of Justice released the names of seven individuals who have been charged in a $120 million tax fraud scheme. According to the indictment, the false return scheme was national in scope, causing the filing of tax returns for at least 180 clients from 30 different states, and requesting more than $120 million worth of fraudulent tax refunds. The indictment alleges that the defendants and clients of the scheme collectively filed more than 380 tax returns, mostly from tax year 2008, reporting the amount of their personal debt obligations as both income and as federal tax withholding.

Other reports mention the scammers were promulgating a “redemption theory.” Here’s the scoop on this bizarre tax protestor theory according to Wikipedia:

Redemption theory involves claims that when the U.S. government abandoned the gold standard in 1933, the government pledged its citizens as collateral so that the government could borrow money. The movement also asserts that common citizens can gain access to funds in secret accounts using obscure procedures and regulations.

According to the theory, the government created a fictitious person (or “straw man”) corresponding to each newborn citizen with bank accounts initially holding $630,000. The theory further holds that through obscure procedures under the Uniform Commercial Code, a citizen can “reclaim” the straw man and write checks against its accounts.

The “straw man” argument is cited by the IRS as one of the 40 frivolous tax arguments which, if made, subjects the taxpayer to tougher penalties. The “straw man” argument is #18.

Last week we learned about outspoken Chinese artist, Ai Weiwei, and his tax problems. Today the news from China is that Weiwei’s supporters are pooling their money to the tune of $800,000 (and rising) to help him pay what he owes.

Weiwei certainly has the money to pay his tax bill, so what’s the motivation behind these donations? Are these wealthy art collectors who don’t want their Weiwei pieces to lose value? Unlikely. This is an artist who is known and adored for controversy; refusal to pay the government will probably only increase his popularity and increase the value of his work. Also, wealthy collectors would probably not make airplanes out of money and toss it over the gate to Weiwei’s home. Certainly some of the donations are coming from the wealthy and politically connected. However, it is clear that many of the donations are from average Chinese protestors who are symbolically “casting their vote” according to Weiwei.

It’s probably only a matter of time before a high-profile tax protestor in the Unites States pulls some publicity stunt designed to lure like-minded citizens to vote with their checkbooks like they have done in China. Good luck getting that to work here though.

Just when I said that multiple-filers were a thing of the past, something very similar turns up in the news . . .

Who: Owners and others affiliated with Old Quest Foundation, Inc. and De la Fuente and Ramirez and Associates (55 indicted in all)

Where: Fontana and Rancho Cucamonga (San Bernardino County)

What: Most of the 55 indictments alleged conspiracy to defraud the United States

How: These groups arranged meetings during which they convinced taxpayers to buy into a scheme that involved claiming refunds to which they were supposedly entitled from a “secret government account.” Many of the people who were duped were required to pay fees to participate in the meetings, even bigger fees to sign up in the program, and then also a cut of the amount obtained from the false refund returns.

How Much: $5 million in refund checks were issued in error. The total dollar amount placed on this scheme is $250 million.

If you would like further guidance on what kinds of arguments are legitimate and what kinds of arguments might land you in prison, feel free to contact Montgomery & Wetenkamp: http://www.mwattorneys.com

Attorney Advertisement. Tax Attorneys Montgomery & Wetenkamp are licensed by the State Bar of California, are licensed attorneys authorized to practice before the United States Tax Court, and may practice before the Internal Revenue Service (IRS) as attorneys in all 50 states. Sacramento Tax Attorneys and Modesto Tax Attorneys Montgomery & Wetenkamp perform all services in Sacramento, California and Modesto, California. The content of this website is for informational purposes only and does not constitute legal advice. The tax information contained on this website, is not intended to be used, and cannot be used, referred to or relied upon, for the purpose of avoiding tax-related penalties under the Internal Revenue Code or promoting, marketing, or recommending to another party any tax-related transaction or matter addressed herein. Past successes cannot be an assurance of future successes because each case must be decided on its own merits and will differ if based on different facts. Full disclaimer provided on our disclaimer page and is incorporated herein by reference.

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